NFTRH; US Stock Market Update

Major US stock indexes are still in the patterns we noted over the weekend and the Transports not only remain below resistance, but broke down further.

The Russell sported a Hammer candle at what would be a higher low and this index should be watched for that reason and in consideration of its usual status as a seasonal play (Small Cap ‘January effect’). This year is especially significant because the RUT has served up losses to investors and they are probably finishing up tax loss selling about now. The mid caps are in a similar situation (Hammer) and the SOX, while getting dinged yesterday, can still rise to fill the gap noted on the chart.

All in all, backing out the Transports, the picture looks like one where a bounce can happen in US stocks, even if only a seasonal thing. On the major indexes, the top lines of the Triangles would be targeted and on the small and mid caps, a marginal higher high (SMA 200 on the RUT, for example).

While I am bearish on the market as the preferred ongoing stance, we have noted that the balance of 2015 was likely to be a chop and grind due to the negative sentiment climax last summer and constant policy maker noise. The charts above seem to agree with this view as the next move in the chop could be a bounce upward.

The parameters are clear, however. A breakdown from the Triangles or lower lows on RUT and MID would eliminate this short-term view, and would be very bearish.

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